The challenge of attracting and retaining talent for the investment banking industry: why a meaningful approach is key

Jul, 12, 2018

Many investment banks are still struggling to retain top talent – and that’s despite their having introduced new measures such as faster promotions in a bid to attract employees. Increasingly, young professionals are finding themselves more drawn to alternative sectors such as technology or innovative start-ups. The result is that banks are now being required to double their efforts to offer a more meaningful employment experience. What has led to the retention of talent becoming such a key priority for investment banks and what steps can they take to address the issue of high turnover atjunior level?

Investment banks face talent crisis

Historically, a young graduate would join a firm as an analyst right out of college and would work his way up through the ranks of Associate, Vice President, Director and Managing Director. A recent graduate landing a first job within a top investment bank could typically expect 90-hour-long weeks, working with spreadsheets and presentations. But this would have been seen as a stepping stone to a successful career that would earn both large pay checks and, importantly, respect and admiration from friends and family.

In recent years, however, this has changed. Investment banking has now become a less attractive career option. A recent survey showed that a mere 4% of Harvard Business School graduates wanted to work in investment banking. In the UK, just 9.6% of London School of Economics graduates applied for roles in investment banking in 2017, compared to 41% in 2012 – the lowest proportion since 2009 when banks halted graduate recruitment in the aftermath of the financial crisis.

If consulting still remains an attractive career path – 41% have applied to this sector this year – the industry is now also facing increased competition for talent from innovative companies. Millennials continue to be attracted to disruptive start-ups where they can see the impact of their work and benefit from more flexibility and greater responsibilities.

This situation has financial consequences for the firms. A report released in 2017 by consulting firm Quinlan & Associates showed that some banks are incurring up to $1 billion in annual costs to replace employees leaving voluntarily. Numerous banks face a brain drain that can only be solved by radically shifting their cultures, said the study, citing:

Make the experience more meaningful

So, what are the reasons behind this crisis? Sure, a tough business cycle has made it harder for many banks to continue paying dealmakers competitive wages. But the taxing lifestyle of an investment banker, typically associated with long hours and tight deadlines, is also part of this permanent trend. Junior bankers are now seeking for a more meaningful experience – e.g. getting real reps on live deals and not doing busy work or constantly working on pitches.

A core purpose of investment banks is the finding of new clients and the serving of existing ones. As juniors move up the ladder, they are tasked with more and more sourcing work: finding potential clients, getting to know them, and then pitching for a deal when the time is right. In other words: higher value-add tasks, complemented with adequate compensation. Those junior bankers who receive appropriate training and mentoring and who are made to feel that they are part of a team where their contributions are valued will eventually provide higher value to the bank.

Investment banks will have to think long term

If banks want to retain their top employees and avoid the costs that ensue from voluntary resignations, Quinlan & Associates recommended a range of options:

Geoffrey Chaumatte, as a Chief of Staff at a Major European Bank, has already included innovation and automation in his retention strategy. “Significant changes are ongoing in the banking industry to modernise the way we work,” he said. He insists on the importance of using productive tools and spreading an innovative spirit firmwide. “I believe that efficiency can be an HR tool,” he said. “Our strategy rests partly on the automation of low value-added tasks. We can easily optimise and automate time-consuming processes; for example, through well-thought Excel spreadsheet, organised mailboxes or innovative tools such as UpSlide or Tableau.”

The objective for our company (a major European bank) is to free junior bankers from low-value tasks to enable them to refocus on impactful and higher value-added topics.

Many top banks are now taking steps to keep junior staff happy. They are promoting analysts more quickly, providing more training, and encouraging job rotation programs:

– Credit Suisse now gives bankers Friday nights off;

– UBS allows bankers two hours of ‘personal time’ a week;

– JPMorgan is relaxing its dress code;

– Both Goldman Sachs and Morgan Stanley are updating their performance reviews to provide more qualitative and frequent feedback to employees.

Whether all this will be enough to stem the tide of departures, however, still remains to be seen.